Board Governance in a Polarized Environment

Partner Content Provided by FGS Global 

As recently as 2022, companies and their boards were scrambling to keep up with progressive stakeholder expectations. 

Companies that did not publish glossy environmental, social, and governance (ESG) reports; adopt diversity, equity, and inclusion (DEI) targets; and set high-profile commitments to climate goals risked a tainted brand—or worse. Boards that did not include women, people of color, and ESG committees felt the heat of shareholder pressure and PR embarrassment. 

Those trends found their way into institutional agendas, such as in Nasdaq’s 2021 board diversity listing standard, in DEI-driven proxy-advisor voting policies from Institutional Shareholder Services and Glass Lewis, and in Securities and Exchange Commission staff guidance that made ESG shareholder proposals harder to exclude. Additionally, a Goldman Sachs 2020 policy excluded initial public offering underwriting for companies that did not meet its board diversity requirement. 

In the competition for customer loyalty and employee talent, companies vied to demonstrate societal leadership through corporate advertising, sponsorships, and prominently positioned DEI and sustainability executives. 

Major Court Cases Shift the Ground 

Then, in June 2023 the United States Supreme Court, in a single decision on two high-profile cases, held that using race as a factor in college admissions was unconstitutional, effectively ending affirmative action as it had previously been practiced. That decision fueled the rise of anti-DEI activists like Robby Starbuck, who set the stage on X for a vocal “anti-woke” backlash. Starbuck built a following and raised funds by singling out John Deere, Tractor Supply, Harley-Davidson, Ford, and many others, attacking not just companies but often individual executives and board members for what he characterized as bias in favor of minority groups. 

Starbuck’s success in forcing boards and C-suites to roll back DEI policies fed partisan 2024 election year rhetoric. When the new administration took power, it launched a flurry of anti-DEI actions from day one: executive orders, new and rolled-back federal regulations, federal contracting restrictions on suppliers who failed to expunge DEI programs fast enough, and firings of high-profile federal employees deemed insufficiently aligned with new priorities. 

As a result, gears across the private sector ground into reverse. 

Companies rapidly scaled back or downplayed the DEI and ESG commitments they had put in place only a few years, even months, earlier. Proxy advisors backed off their support for ESG shareholder proposals in recognition of new regulatory and political risks. Executives who once comfortably asserted ESG values and purpose in public went quiet. And that 2021 Nasdaq standard? Vacated early this year. 

Pendulum Swing or Vise Grip? 

But many boards, companies, and advisors may be drawing the wrong conclusion from all this. 

Prevailing wisdom holds that a pendulum has swung from one side of the political divide to the other. That the expectations driving corporate policies, positions, and governance have reversed. And some believe that the pendulum will never swing back. According to this view, new conservative policies from Washington, DC, and some red states have replaced the demands for social responsibility from the left-leaning stakeholders and blue states. 

But what boards are actually dealing with is a vise, not merely a pendulum.  

The persistence of environmental and social challenges virtually guarantees that a push for climate solutions and equity will surge again—from investors, customers, and especially a rising generation of employees with a huge stake in future environmental and social consequences. Boards would be wise to keep progressive issues on their plate. 

C-suites and boards have their work cut out for them as they reconcile fiercely competing stakeholder values, beliefs, and priorities. The challenge they face is not which direction to go but how to manage the pressure—and the risks—from both sides at once. 

Squeeze Play 

As a result, if boards have found governance challenging over the last few years, they (as the expression goes) “ain’t seen nothing yet.” 

The 2026 midterm election campaigns will be waged with any number of political-ends-justify-any-means tactics from both sides. The explosion of AI tools generating less and less detectible deep fake images and voices is rendering truth nearly impossible to discern. The current administration’s propensity to move fast and break things—countered by waves of popular protest—will throw many strategic planning assumptions up in the air. 

Boards will face what some are calling a polycrisis of multiple overlapping and mutually reinforcing issues, ranging from culture wars to geopolitics to climate change.

They are already overseeing CEOs who are burning out at an increasing rate. CEOs are swamped by the need to understand the complex external environment and develop a strategy for minimizing reputational risk and effectively represent the company’s brand with conflicting stakeholders. And they are asking for help. According to Spencer Stuart, 60 percent of CEOs want their boards to help solve these complex problems, and 50 percent want to feel that their board “has their back” during challenging times. The same study shows that 61 percent of directors believe they act as thought partners while only 41 percent of CEOs agree. 

In short, boards will need to do more than ever to help guide management safely through polarized stakeholder challenges—often many challenges at the same time. 

They will need to help management play the long game. The chaotic external environment will tend to drive short-term tactical focus, but it will be more important to maintain the long-term trust of stakeholders, especially employees, with a consistent, coherent throughline of purpose, strategy, and values. The corporate landscape is littered with damaged brands built on principles that proved ephemeral when those principles were put to the test. Leaders of those brands have much to answer for, but so do their boards. 

Long guided by the governance mantra “nose in, fingers out,” boards may now need to lean in even more to protect the interests of shareholders, especially when monitoring the positioning of the company on hot button issues—no easy matter when polarized views and the tensions they create might exist in the boardroom itself. 

External advisors can provide critical support. So can bolstering in-house C-suite capabilities and experience. And breadth and depth of board member perspectives on the world outside will be indispensable. Companies will need boards with diverse perspectives and diverse skills to deal with a world of diverse and conflicting risks. 

What, in this challenging and unprecedented environment, are the oversight questions boards should be asking in 2026? 

Here are just a few: 

• On what current social and/or political issues is the company most exposed to polarized pressure? 
• Beyond monitoring internal policies, what role should the board have in the company’s external positioning on these issues? 
• Has the board been adequately briefed on these issues, enabling it to provide an objective understanding of their backgrounds, key players, and potential business implications? 
• Does the board have access to an adequate diversity of views and insights across all dimensions of the issues, either on the board itself or through outside advisors? 
• Does the board have reliable ways to learn how peer companies have handled complex issues? What has worked and what has not? 
• Does the board have a way to facilitate candid but constructive and inclusive governance debates on socially and politically contentious topics? 
• How well prepared is management to handle an external pressure campaign? 
• Are corporate issue management protocols in place, including a carefully researched stakeholder map and clear guidelines on who speaks for the company? 
• Have scenarios and responses been developed for a wide range of potential external developments, such as for when the company should defend, retract, or pivot on public positions? 
• Is an effective team of legal, communications, and government relations advisors in place to deal with regulatory risk? Does that team bring insights and contacts that span both sides of the political divide? 
• Is the company’s brand and reputation firmly grounded in robust, resilient values that will withstand pressure from one side or the other? 
• Is the board satisfied that management has put in place processes for scenarios involving employee actions, such as when employees are seen to be making politically divisive statements on social media that may reflect on their work or the company? 
• Are appropriate mechanisms in place to ensure executive and board members’ personal security and mitigate their reputational exposure to activist “naming and shaming” attacks? 

None of this is easy. Managing board-level issues in today’s polarized world is rarely a matter of choosing right versus wrong. Today’s board agenda is about making judgments in the gray spaces and managing the tensions between integrity, risk management, and competing views of the world. The role of board governance has become both more critical and demanding, and the imperative for boards to lean in has become more urgent.